Improving Economics of Renewable Energy Investment Incorporating CSR into the Corporate Culture Formulating Effective Strategy for Nonprofits Humanizing Supply and Demand: Perspectives on Fair Trade from Farm to Shelf Investing in Social Ventures Measuring Impact for NGOs Financial Sustainability of Microfinance Improving Economics of Renewable Energy Investment Panelists: Irvin Barash '64, President, Vencon Management; Cameron Brooks, Project Director, Clean Energy Group; and Mark Townsend Cox, Chief Investment Officer of New Energy Fund. Moderator: Bruce Usher, Adjunct Associate Professor, Columbia Business School and CEO, EcoSecurities. 

The panel focused on the enormous growth potential for renewable energy and its increasing attractiveness to investors. Prof. Usher began by noting the topic's timeliness in light of recent oil and fuel supply disruptions, higher energy prices and political instability in oil-producing regions. Irvin Barash pointed out that no one is currently supplying the energy needs of a significant portion of the developing world, and that renewable energy is perfectly situated to fill this vacuum. Noting the long lag between the initial development of a renewable energy technology and its inclusion in commercial products (more than 100 years for solar energy), Barash stressed the need for more young entrepreneurs to get involved and find creative ways to further develop and deliver such technologies. Cameron Brooks suggested that private/public partnerships may be the bestroute to hasten the adoption of renewable energy. Brooks also commented on the success of state-based clean energy initiatives in advancing renewable energy. Hinting at the consumer demand for renewable energy, he voiced his belief that these initiatives were not just driven by the absence of federal action, but also by populist sentiment. 

Mark Townshend Cox, Chief Investment Officer of the New Energy Fund, a hedge fund focused on the emerging sustainable energy technology market, reiterated that the time was ripe for investment in renewable energy, highlighting studies that have shown that oil will continue to become harder and more expensive to extract. Demonstrating his optimistic vision for renewable energy investment, Cox listed several alternative energy companies that were already turning profits, noting that others were sure to follow in the future. 

Incorporating CSR into the Corporate Culture Panelists: Julie Hoesterey, Director of Corporate Social Responsibility, Deloitte; Mike Lubrano, Head, Investor and Corporate Practice, Corporate Governance, International Finance Corporation; Jaycee Pribulsky, Manager of Community, United Technologies Corporation; and Lynn Swarz, Vice President, Citigroup. Moderator: Sandra Navalli Associate Director, The Sanford C. Bernstein & Co. Center for Leadership and Ethics, Columbia Business School. The panel explored the challenges in addressing and effectively implementing Corporate Social Responsibility (CSR) policies. Navalli began with a discussion of the basic tenets of CSR. Despite varying interpretations, CSR is broadly perceived to represent a company's efforts to achieve a triple bottom line and achieve financial, social, and environmental returns on its investments. When discussing the difficulty of "selling" CSR as a set of policies and/or practices within their organizations, panelists acknowledged that they face similar challenges, including: Positioning CSR as a values-based initiative vs. a bottom line-driven initiative; Finding the appropriate functional and administrative placement for CSR staff and initiatives; and Translating corporate values into individual behaviors and actions, i.e. how to coach and train managers to act in concert with and on behalf of company policies The panelists discussed how they came to assume their CSR positions and some acknowledged their roles were, in fact, created to respond to negative press and/or a failure of public confidence. They indicated that their companies are now stronger as a result of the CSR policies and programs that have been put in place to respond to major crises, and that CSR has become a natural and evolving component of corporate policy and relations. 

Students interested in CSR careers were left with one primary piece of advice: develop a set of industry or functional skills within a field of interest and then use these skills to advance change from the inside out. 

Formulating Effective Strategy for Nonprofits Panelists: Fran Barrett, Executive Director, Community Resource Exchange; Amy Houston, Senior Manager, Strategic Planning, Robin Hood Foundation; and Richard Mittenthal, President and COO, TCC Group. The panel was moderated by Raymond Horton, Frank R. Lautenberg Professor of Ethics and Corporate Governance. The panel explored the need for nonprofit managers to think more strategically about their organizations, how to link strategy formulation with the mission and goals of the organization, and how to identify actions that will execute both mission and strategy. 

While nonprofits are generally endowed with passionate individuals and operate without the pressures of formal revenue or profit objectives, they are not as proactive in developing clear, goal-oriented strategy as their for-profit counterparts and need a strategic mindset to stay credible and viable. The panelists underscored the challenges nonprofits face in trying to drive change within their organizations, particularly when they are reluctant to make "hard" decisions, such as resolving human resources issues. Consequently, they are often unable to adapt quickly to changing environments. The strategy development process involves making decisions about the organization's future direction. But first, a nonprofit must truly understand its current state. A thorough situational analysis where perspectives from all stakeholder groups are gathered is the first step, and also helps bring everyone on board with the process of effecting change in the organization. Planning for growth is an issue that all nonprofits need to address in their strategy development process, since growth can be a destabilizing factor. When planning for the future, nonprofits must assess the feasibility of their goals. "Revenues" in the nonprofit arena are fragile, and these funds need to be allocated carefully. Once a strategy has been formulated, the key is to make it actionable, and ultimately, to achieve buy-in from the board of directors. Only when the board has embraced the strategy can implementation successfully take place. Implementation is not the end of the road. Strategic development and implementation are part of a continuous cycle fed by ongoing evaluation to measure the progress and impact of strategic initiatives. 

Humanizing Supply and Demand: Perspectives on Fair Trade from Farm to Shelf Panelists: Jim Munson, Vice President, Dallis Coffee; Rodney North, Board Director, Worker-owner, The Answer Man, Equal Exchange; Justino Peck, Chairman, Toledo Cocoa Growers Association (Belize); and Ella Silverman, Cocoa Accounts Manager, TransFair USA. Moderator: Jonathan Jacoby, MBA/MIA '06 The panel highlighted each area of the fair trade supply chain, from the source (coffee growers in Belize), to fair trade "certifiers," to marketers and re-sellers. Jim Munson expressed the need for fair trade most vividly by describing the profit structure in the coffee market, where coffee shops generate revenues of over $100 per pound but growers receive only $0.50 per pound. Panelists explained that fair trade is now becoming a competitive advantage in the marketplace, with sales of fair trade-certified products growing an estimated 50-70 annually. However, the industry leaders on this panel agreed that the long-run success of fair trade practices would be determined by a single criterion: The broader market must become aware of current practices and fundamentally change their purchasing preferences to fair-trade products. 

Investing in Social Ventures Panelists: Denise Ciesielka, Portfolio Manager, Acumen Fund; Djena Graves, Director of Business Development, ICV Capital Partners, LLC; David Kirkpatrick, Managing Director and Co-founder, SJF Ventures; and Ann Partlow, General Partner, Earthrise Capital. Moderator: Cathy Clark, Adjunct Assistant Professor, Columbia Business School. The panel outlined the challenges faced by for-profit and nonprofit investment firms and explored how for-profit or nonprofit status impacts expectations of investment returns. In addition to discussing the investment strategy of their firms, each panelist shared their personal experiences in the industry. Each firm had unique investment portfolios, with ventures ranging from a frozen egg roll company with a 95 Hispanic workforce, to a 'Fannie Mae' equivalent in Pakistan that manages 10,000 loans. 

All panelists emphasized three guidelines for investing: 

  1. Identify investments that meet the social objectives of the company
  2. Be aware of and attentive to stakeholder needs
  3. Invest in ventures with expected positive returns. 

While each firm's objective was to invest in socially responsible companies, there were differences in the expected returns for a for-profit firm versus a nonprofit firm. With the exception of Acumen Fund, which is a nonprofit organization, all firms sought to invest in ventures that could yield at least the market rate of return. All, including Acumen Fund have no tolerance for zero or negative returns. In addition to emphasizing the importance of meeting investor expectations, all three for-profit panelists agreed that the word 'social' was not always helpful in marketing and developing their brand. Their experience was that, due to historical returns of social investors, the word "social" was not, in general, Wall Street friendly. It is also a word that can be broadly defined and can mean different things to different people. For Acumen Fund, however, the word 'social' seems to aid in its business development strategy because it focuses on slightly different types of investments with different expectations for return. When asked what advice they'd give to a social investor or social entrepreneur, the panelists produced a wide range of responses. Djena Graves cautioned against being blinded by the "perfect" social criteria, and stressed the importance of a strong focus on "business" criteria. Ann Partlow said that one of the most important lessons that she has learned is "knowing when to quit and when to keep going: "You may really fall in love with the company," said Partlow. For David Kirkpatrick, the concept of "Don't burn your bridges" was important in establishing investor trust and long-term relationships. Denise Ciesielka, speaking with regard to Acumen Fund's business model, suggested that focus was key to promoting her firm's goals. (Acumen Fund had originally provided both loans and grants but that model ultimately became too confusing for investors.) She also emphasized the importance of identifying firms that are close to market launch. All four panelists agreed that their firms do not invest in start-up ventures because of the high risk involved and the lengthy timeline from launch. In the end, whether working in a nonprofit or for-profit investment firm, the key objective for all four investors is to ensure returns on investment and to meet the needs of their investors and ventures. As summarized by Partlow, "Being a good businessperson means being aware of and attentive to your stakeholders, period." 

Measuring Impact for NGOs Panelists: Josh Baron, Manager, The Bridgespan Group; Kimberly Syman, Partner, New Profit Inc.; and Michael Weinstein, Director of Policy, Planning, and Research, Robin Hood Foundation. Moderator: Murray Low, Director, Eugene Lang Center for Entrepreneurship, Columbia Business School. The social sector is becoming increasingly aware of the importance of measuring the impact of its programs - that is, of quantifying benefits and costs. Defining the impact and identifying successful nonprofit organizations is or should be important to all foundations, individuals, government agencies and nonprofit managers. The panelists demonstrated how measuring impact is important to different organizations for varying reasons. Josh Baron explained that measuring impact is important for a nonprofit consulting firm like Bridgespan because it allows them to analyze the effectiveness of their consulting engagements and to share that knowledge with the social sector. Accountability to donors is not necessarily first priority for such an organization; rather, Bridgespan aims to understand, and in turn to help clients understand the effectiveness of their programs in order to add value to the sector. Venture philanthropy funds such as Robin Hood and New Profit Inc. use various metrics of social return to prove to donors and investors that their funds are being put to good use. Donors are becoming increasingly sophisticated and demanding, and merely doing good no longer suffices - donors want to know exactly how good. Philanthropists are demanding a level of transparency and accountability that one typically expects from investors in publicly-traded companies. It is an exciting trend and a crucial one if we are to continue to attract funding for the social sector around the world. 

Financial Sustainability of Microfinance Panelists: Marc De Sousa-Shields, Partner and Director of Capital Markets & SME, Enterprising Solutions Global Consulting; Michael Rauenhorst, Senior Consultant, Deutsche Bank; Rose Sculley, Director of Private Sector Development, Women's World Banking; and Drew Tulchin, Program Officer, Capital Markets, Grameen Foundation USA. The panel featured a discussion among microfinance specialists and Wall Street professionals on the prospects of microfinance as a financially sustainable solution to poverty. The panelists defined microfinance as the supply of loans, savings and other financial services to the poor. While the estimated market demand for microfinance is approximately $300 billion, the current supply is only $4 billion. Given this level of demand, microfinance institutions (MFIs) that offer these financial services to the poor have grown rapidly over the last few years. With their recent success, MFIs have also been confronted with issues related to capital constraints. Microfinance institutions have historically been nonprofit organizations, which traditionally depend on donor funding for financial support. As a result, MFIs have limited capital for financing future growth opportunities and client outreach. To address these issues, several financially self-sufficient MFIs have transitioned into regulated financial institutions. This process of commercialization enables MFIs to shift away from donor subsidies towards commercial funding. As profitable, commercial institutions, MFIs offer attractive investment opportunities, and there are currently 40 funds focused on investing in microfinance. Deutsche Bank has three such funds, explained Senior Consultant Michael Rauenhorst; their most recent fund, totaling $75 million, will close in November. The primary objective of microfinance funds is either to invest through equity ownership, issue direct loans, or more commonly, offer a letter of credit to encourage local banks to lend to MFIs in the local currency. 

While the surging popularity of MFIs on Wall Street suggests great potential for long-term viability, opponents of commercialization argue that this model of becoming profit-making financial entities poses a serious risk of mission drift. The crux of this argument is that MFIs exist because poor clients are alienated from the commercial sector and that commercialization will cause MFIs to lose sight of the original goal of serving the poor. In achieving and maintaining profitability, MFIs often face pressure from outside investors to move "up market" in order to realize greater revenue through larger loan sizes. This presents some conflict between being financially sustainable and still serving one's core client base. The consensus among the panelists was that while MFIs can survive as regulated, profit-making financial entities, there are some cases where microfinance is simply not profitable. For example, MFIs that target extremely poor clients living in remote areas with low population density have a very difficult time becoming financially sustainable. In such settings, microfinance may require continuing subsidies from donor agencies. Thus, the general belief is that there is room for both models: for-profit MFIs serve a key segment of clients which are not "banked" by traditional commercial banks and non-profit, donor dependent MFIs are better able to serve the "poorest of the poor."